Posts Tagged ‘u.s. economic activity’

The refusal of European economies to undertake deficit spending to stimulate consumer spending is impeding a global economic recovery.

The latest report from the U.S. Treasury Department that conducts economic analysis confirms that the U.S. economy remains deeply troubled, and that an improvement is not expected anytime soon across broad sectors of the economy. While the report has negative implications for all of us, automakers looking for an upturn in sales will likely have to continue sharp cost cutting actions as sales continue to languish.

In a statement yesterday to the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association, the Director of the Office of Macroeconomic Analysis, Ralph Monaco, said: “Data for growth in the first quarter will not be available until April 29, but economic indicators released thus far suggest that real GDP declined sharply again in the first three months of 2009. In the fourth quarter of 2008, real GDP fell by 6.3% at an annual rate – the largest quarterly loss since early 1982. That followed a 0.5% decline in the third quarter. Private forecasters are looking for about a 5% decline in the first quarter.”

It was of course the precipitous decline in consumer spending during the second half of 2008 that was largely responsible for the downturn in global economic activity, which sent virtually all of the world’s automakers into losses. A viscous cycle of worker and production cutbacks, which then resulted in declining buyer confidence, which resulted in more losses and cutbacks, was established, a negative trend that persists to this day.

Particularly troublesome for international automakers is the refusal of most governments, except for China and the U.S., to embark on large fiscal spending programs to revive their own economies and bolster consumer confidence and spending.

Treasury noted that consumer spending in the U.S. “stabilized early in the first quarter,” according to data available through February, and appears to be on track to make a modest positive contribution to growth in the first quarter. Preliminary estimates for April U.S. auto sales results show annual selling rates stuck below ten million units, with no signs of recovery. It is not coincidental that over in another part of Treasury, the Auto Task Force is insisting that restructuring plans from Chrysler and General Motors use annual rates of around 10.5 million units in their sales volume assumptions. (more…)